Concepts

Multi-factor productivity (MFP)

Multi-factor productivity (or total factor productivity) refers to the part of growth in value added which is not explained by the growth in inputs (capital, labour). However, this cannot be measured directly, so its effects have to be assessed as a residual, when other factors having influenced the growth of productivity have been subtracted. Usually, the multi-factor productivity is thought to be almost the same as technical development, but it may also include other factors. Multi-factor productivity can be calculated based on value added or output. It is derived when the effects of contributions of capital and labour force are deducted from value added (or output). If the calculation is based on the output method, the effect of intermediate consumption is also deducted.